The use of this product is advisable when the importer and the exporter have experience of doing business with each other and have a high degree of mutual trust.
When using a documentary collection, the parties to a trade transaction should consider the following circumstances:
- The solvency of the importer and the willingness to pay should not be in doubt;
- There must be a stable economic, political and legal environment in the importer’s country;
- There should be no restrictions on currency control or imports in the importer’s country;
- Payment by documentary collection is simple and cheap, in many cases the payment is faster than during open account trade;
- In many cases, the exporter has the opportunity to maintain control over the supplied products, until the buyer pays or accepts the bill of exchange;
- In case of documentary collection, the payment should be regulated by the unified rules established by the International Chamber of Commerce (compliance with these rules is mandatory for all parties to the transaction, including importer’s and exporter’s servicing banks);
- When paying by documentary collection, the bank is not responsible for the payment and also the bank is not obliged to check the content and/or authenticity of the documents submitted by the exporter.
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